London, February 20: The UK unemployment rate has climbed to its highest level in nearly five years, according to the latest data from the Office for National Statistics (ONS). Figures released for the final quarter of 2025 show the rate hit 5.2% in the three months to December, up from 5.1% in the previous period. The increase comes amid reports of a hiring slowdown as businesses adjust to rising overhead costs and recent fiscal policy shifts.

While the headline figure reflects a broad cooling of the labor market, the impact is most severe among younger demographics. The unemployment rate for those aged 16 to 24 has jumped to 16.1%, marking a ten-year high. International Unemployment Day Date, History and Significance: Know About the Day That Sheds Light on the Problem of Unemployment Across the World.

Industry analysts suggest that entry-level positions are often the first to be curtailed when firms face economic pressure. This trend has sparked concerns regarding long-term career scarring for recent school leavers and graduates entering a tightening market.

Rising Costs and Slowing Wage Growth

Business leaders have pointed to recent government measures as a primary driver for the hiring freeze. Specifically, the hike in employer National Insurance contributions and the further rise in the minimum wage—introduced in Chancellor Rachel Reeves’s recent Budgets—have increased the "cost of employment" for many firms. UK Social Media Crackdown: PM Keir Starmer Tightens Online Safety Act To Include AI Chatbots, Aims To Protect Children.

While those currently in work are still seeing wages rise faster than inflation, the pace of that growth is beginning to stall. This deceleration suggests that the period of significant real-term pay gains may be reaching its limit as employers prioritize cost management.

Political Reactions and Policy Debate

The government and opposition remain sharply divided on the cause of the downturn. Work and Pensions Secretary Pat McFadden acknowledged the challenge, stating that tackling youth unemployment is a "key priority" for the administration. He highlighted new initiatives aimed at making it easier for young people to secure apprenticeships.

However, the Conservative opposition characterized the figures as the "predictable result" of recent tax increases. Shadow Work and Pensions Secretary Helen Whately argued that by making hiring more expensive, the government is effectively closing the door on the next generation of workers.

In response to the data, the Liberal Democrats have called for targeted relief, including an emergency VAT cut for the hospitality sector—an industry that typically serves as a major employer for young people but has seen significant job losses.

A Growing Social Concern

Beyond the immediate economic statistics, there are growing warnings about the social implications of high youth unemployment. Former Health Secretary Alan Milburn warned that a lack of early-career opportunities could trap young people in a cycle of poor health and welfare dependency.

As the government prepares for the next fiscal quarter, the pressure is mounting to prove that its "growth mission" can translate into stable employment figures and reverse the upward trend in joblessness.

(The above story first appeared on LatestLY on Feb 20, 2026 10:28 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).